June 19, 2014

Finally, We're Getting the Real Story on Obamacare Rate Shock

The debate about Obamacare can get pretty simplistic. It’s a total success! It’s a total failure! The truth is somewhere in between and the real argument, among those who follow the law closely, is whether the good stuff outweighs the bad stuff or vice versa. That’s particularly true of an issue that dominated the headlines for much of last year: Rate shock.

The Affordable Care Act forces insurers selling directly to consumers to provide more comprehensive benefits and to stop discriminating against the sick—changes that, all else equal, tend to make insurance more expensive.

But the law also offers consumers tax credits, worth thousands of dollars a year to some people, and it makes Medicaid available to the more of the poor. It also allows for more direct price competition among insurers. Those changes tend to make insurance less expensive, relative to what people were paying before.

So which effect is bigger? Looking strictly at premiums, are there more winners than losers—or vice versa? As of Thursday morning, we have some new information to help us answer those questions.

It comes from a new survey by the Kaiser Family Foundation. Researchers there focused on people who are now getting insurance on their own, rather than through employers or government programs like Medicare and Medicaid.

The responses reflect what people think has happened to them over the last year, which is not always the most accurate indicator of what has actually happened. Actual data from government or insurers tends to be more reliable. But these surveys do provide insights and Kaiser's command particularly strong respect from public opinion experts I know.

Here are are the big takeaways:

1) Strictly among people who had coverage previously, the “winners” (people who say they paying less for insurance now) outnumber the “losers” (people who say they are paying more for insurance now). Specifically, 46 percent of respondents who had insurance before Obamacare said they were spending less on their new monthly premiums, while 39 percent said they were spending more. That’s not much of a difference, given the survey’s margin of error. But it certainly doesn’t suggest, as the law’s opponents frequently claim, that most people are worse off. And when you consider that many people who were buying insurance on their own previously are now getting Medicaid, which is basically free, it would appear that there are clearly more winners than losers, at least when it comes to what people are paying up front for coverage.

2) For the folks who had insurance last year, benefits are a mixed bag but choice of doctor has declined. Premiums are just one way of measuring whether people are better off. It matters whether, in the process of switching from pre- to post-Obamacare, people have better benefits. Here the findings were mixed and, on the whole, a little less encouraging. Some people said they had better benefits and protection, while a (very slightly) smaller proportion said they now had worse benefits and protection. Nearly a third—32 percent—said they had less choice of primary doctor than before, while just 10 percent said they had more choice of primary care doctor.

Of course, people who had no insurance last year will tend to have more choice of provider—and much, much better covearge—since they are no longer uninsured. That makes the next fact even more relevant.

3) Most people buying in the new marketplaces say they were uninsured last year. This was another big controversy of the last few months. As enrollment soared, critics maintained that most of the people buying coverage already had insurance—proof, they said, that the law wouldn’t significantly reduce the number of Americans without insurance. But in the Kaiser survey, 57 percent of the people buying coverage through the marketplaces said they had no insurance previously, and a large majority of those said they’ve been without coverage for at least two years. That’s consistent with polling from Gallup and RAND and the Urban Institute, though it still doesn’t tell us precisely how big an impact the law is having—or whether, by year’s end, the reduction in the uninsured will match expectations.

4) Perceptions of the law vary enormously, but in predictable ways. Among people who had coverage previously, feelings about the law are more negative. That’s particularly true for people whose plans were cancelled last year: 57 percent say the law affected them negatively, while just 34 percent say it has benefitted them. But among all people buying coverage on their own, a slightly plurality (34 percent) say they are benefiting. And the numbers are even higher among those who are now getting financial assistance through the marketplaces (60 percent, versus just 12 percent who say they are worse off.)

One interesting question is how much political beliefs influence perceptions. Democrats may be inclined to think the law is helping them more than it is, just as Republicans may be inclined to think the law is hurting them more than it is. Another issue is whether people account for changes that would have happened in the absence of the law. Insurance premiums go up every year, for example. It’s entirely possible that some of the respondents who say they are paying more now are simply dealing with the usual year-to-year inflation, rather than the effects of Obamacare. The same goes for choice of doctor. Insurers developed "narrow networks" a long time ago and were starting to rely on them more, as a way to hold down premiums. It's not clear how much the Affordable Care Act actually accelerated that trend, assuming it did.

5. People feel like they have good coverage now, but many worry about being able to pay their premiums. Clear majorities rate their coverage as "excellent" or "good," and say they feel well-protected against the cost of illness. But a substantial minority say they feel vulnerable to high medical bills and a still-higher minority say they struggle to pay monthly premiums. It's entirely possible that those people are better protected than they were before. But those results are a reminder of how much work must still be done, in order to realize the vision of making sure all Americans have access to affordable medical care.

Update: I should add, as I usually do, that these data are just a snapshot of Obamacare's progress—and an incomplete one at that. The law as a whole is a complicated scheme of tradeoffs, with multiple benefits (like more reliable coverage) and costs (like taxes to help finance the subsidies). I happen to think the benefits outweigh the costs by quite a lot. But, as the kids say, your mileage may vary.